ADC Telecommunications Inc. sees its pending acquisition of KRONE as a step toward building up its presence in the structured cabling market to the point where it is a market leader.
"You will see more of us in the future," says Pat O'Brien, president of ADC Connectivity (www.adc.com), based in Minnetonka MN. "We are looking to take a bigger leadership role."
On Thursday, ADC announced its agreement to acquire the KRONE Group (www.krone.com), a global supplier of copper- and fiber-based connectivity solutions and cabling products used in public access and enterprise networks. The proposed acquisition is valued at approximately $350 million in which ADC will pay cash of approximately $291 million. The transaction is expected to close during ADC's third quarter ending July 31.
O'Brien says this purchase was in the works for a long time. Until now, ADC has provided global network infrastructure products and services that enable the delivery of high-speed Internet, data, video, and voice services over customers' networks.
But O'Brien says ADC now has bigger plans, and that it wants to evolve into a global network infrastructure provider that offers both products and services.
"We are looking to this as a first step," says O'Brien. "We are building a foundation for our business behind a historic core customer base."
That foundation is being built in a market that has been in a downturn for several years. O'Brien says ADC wants to make a bigger name for itself among the manufacturers who make high-speed data cabling, patch panels, connectors, optical fiber and the like. And he notes that there is obviously still more capacity than demand for these products.
"Everyone would like to grow their business in the marketspace, and that is not growing as fast as the vendor community would like," says O'Brien.
But he also says ADC is positioning itself in the market for a time of future growth. That growth will come, as will demand for the products, he says. "We see that marketspace growing," says O'Brien.
O'Brien says the growth will eventually be fostered by consolidation in the industry. This is consolidation that began to kick into high gear in recent months. CommScope (www.commscope.com), based in Hickory, NC, completed the acquisition of the Connectivity Solutions business of Avaya (www.avaya.com), effective as of Jan. 31. Belden Inc. (www.belden.com), based in St. Louis, MO, announced that it and Cable Design Technologies (CDT) (www.cdtc.com), based in Schaumburg, IL, have formed a "merger of equals." The combined company, with sales of about $1.3 billion, will be called Belden CDT.
The growing consolidation will lead to fewer manufacturers vying for a piece of the market pie, O'Brien says.
"We feel there is a place for a viable No.# 2, and someone can take on the CommScope Systimax business," says O'Brien. "That is where we look to be long term."
O'Brien says ADC's next step, once the acquisition is completed, will be to look for cost synergies between the two companies. The company has not determined if this will lead to layoffs.
"We bring to the table a very strong North American business, with strong customer relationships and ties, and we are looking for opportunities for KRONE's product portfolio to be cross sold to our customer base," says O'Brien.
The company must also now determine its approach to branding products. But what does this mean for contractors who now purchase KRONE products?
"This is an acquisition, and ADC will be the company," says O'Brien. "The brands have a very similar feel for the customer base. We know their strengths, and we will use their brand to our benefit."